• USD/JPY rose back into the mid-128.00s on Thursday, as the yen came back under pressure amid rising global yields.
• Traders are now braced for remarks from central bank policymakers including Fed Chair Powell, which could catalyse further upside.
• The bulls are eyeing a potential retest of multi-decade highs printed earlier in the week above 129.00.

USD/JPY rose back into the mid-128.00s on Thursday, as traders deemed Wednesday’s yen recovery to be little more than a dead cat bounce/bear market rally. At current levels near 128.30, the pair is trading with on the day gains of about 0.4%, with the yen amongst the G10 outperformers as a result of a rebound in Eurozone and US bond yields in the run-up to ECB and Fed commentary later this evening from their respective central bank heads.

Japan’s Finance Minister, speaking at the G7 meeting, said little to support the beleaguered yen, reiterating his stance that recent yen weakness is unfavourable and that stability is important, but not signaling any direct intentions to intervene. Meanwhile, the BoJ bought JGBs to defend the upper limit of its -0.25% to 0.25% target range, which theoretically means the bank added stimulus, further hurting the yen’s cause.

Given this backdrop, the USD/JPY will be eyeing a retest of earlier weekly highs above the 129.00 level. Traders will be waiting to see whether remarks from Fed Chair Jerome Powell can catalyse the next leg of the rally towards 130.00, a level last hit in April 2002.